This article was co-authored by Clinton M. Sandvick, JD. Clinton M. Sandvick worked as a civil litigator in California for over 7 years. He received his JD from the University of Wisconsin-Madison in 1998 and his PhD in American History from the University of Oregon in 2013.

There are 17 references cited in this article, which can be found at the bottom of the page.

Filing for bankruptcy is a procedure that can discharge your obligation to pay some or all of your debts. If you are married, you and your spouse need to review your assets and liabilities and decide if filing separately or filing jointly would make the most sense. If you own your property separately and have separate liabilities, then an individual filing without your spouse may be a good idea. But if most of your debts are jointly owed, filing alone might not accomplish what you hope. Talk it over with an attorney to make the best decision.

Steps

Part 1

Considering Special Issues for Filing Bankruptcy Without Your Spouse

1

Consult with an attorney about filing separately. When you are considering something as important as filing bankruptcy, you should consult with an expert. If you cannot afford an attorney, you may be able to find a legal aid agency that will help you at a reduced rate. Some attorneys will take occasional clients for free as pro bono cases. Contact the bar association in your state or city for assistance.[1]

When you meet with a bankruptcy attorney, you should ask whether filing separately is a good idea. Review your assets and liabilities, including those of your spouse, to get the best advice for your filing.

2

Analyze your debts and assets. Being “bankrupt” or “insolvent” means, in general, that your total debts outweigh your total assets. You should make lists of all your monthly income and all your monthly debts and compare them. You should also make a list of all the property you own. If your debts are greater than your property, then you may want to consider filing bankruptcy.[2]

For example, suppose your total assets include an old car worth about $1,000, your personal clothing, a moderate television and stereo, and about $500 in a bank account. Your debts include $25,000 in unpaid student loans, $3,500 in credit card bills, and $2,000 that you borrowed from your parents. In this case, your assets are much less than your debts, and you may want to consider bankruptcy filing.

In the early stages of planning, you should review the debts and assets that are yours alone and compare them to your spouse's. If there is a great deal of overlap, then you may want to file a joint petition. An individual petition makes sense if you and your spouse keep many items separate.

3

Think carefully about filing separately. Filing a separate bankruptcy case can be useful under the right circumstances. But in many cases, a separate filing may be unnecessary or pointless.[3]

If you have very few joint debts, and you have substantial individual debts, then an individual bankruptcy filing makes sense.

If most of your debts are joint with your spouse, then an individual bankruptcy filing would not really help. If you file alone, your spouse would still remain liable to pay the joint debts.

If most of your property is owned jointly, or if most of your debts are joint liabilities, then there would probably be no point in filing separately.

4

List all property in which you have an interest. When you complete the bankruptcy form Schedule C to list your assets, you need to list all property that you own separately, as well as all property that you own jointly with your spouse. In most cases, the property that is owned jointly will be exempt from your creditors, but you must report it anyway. There will be a space on the form for you to report whether you own the item alone or together.[4]

This step is where the differences between common law states and community property states come into play. In community property states, your creditors may be able to collect from joint assets as well as the individual assets.

5

Report creditors of debts that you owe, whether jointly or individually. When you complete the bankruptcy forms that list your debts (Schedules D and E), you need to list the debts that you owe alone, as well as the ones that you and your spouse owe jointly. By filing bankruptcy, your obligation to pay any of these debts will be discharged, but your spouse’s obligation to pay them will remain.[5]

6

Be aware that the bankruptcy trustee can challenge what you report. Just because you say that some property belongs to only one of you, or that a debt is owed by only one of you, may not make it so. The bankruptcy trustee, or any of your creditors, could file a challenge in the bankruptcy court to revise what you say and to treat property or debts in a particular way. This could have serious consequences.

Suppose that the trustee finds out that your family has a boat worth $70,000, but you never listed it as an asset because you claim your spouse owns it. The trustee will examine your family finances very carefully to see if this is true. If your spouse received the boat as a gift, or bought it and maintains it solely with his or her own money, then your original report will probably stand. However, if the trustee finds that the boat was purchased from joint income or from a joint bank account, but you just chose to title it in your spouse's name, this could be considered an attempt to defraud your creditors or withhold property. In this case, the trustee could force the sale of the boat to get money to pay your debts. (You could also face a more substantial penalty of not getting a discharge at all.)[6]

7

Understand the effect of your individual discharge. Because the discharge is personal to you alone, filing alone can be useful if you the majority of your debts are separate. If most of your debts are joint with your spouse, then filing alone will not change his or her obligation to pay them.[7]

Part 2

Going Through Bankruptcy Without Your Spouse

1

Engage in credit counseling before you file. By law, before you are eligible to file for bankruptcy, you must consult with an approved, non-profit credit counseling agency regarding credit counseling and a personal budget analysis.[8]

You can find a list of approved non-profit credit counseling agencies on the website of the U.S. Department of Justice. If you enter the name of the state where you live, you will get a list of the agencies, both in-person and online, that are available to you.[9]

2

Consider negotiation and debt consolidation before filing bankruptcy. Many creditors understand that, if you file bankruptcy, they are likely to get very little or nothing from the debt that you owe them. As a result, if you can make offers to pay at least a portion of your debts, your creditors may be willing to accept less than full payment, especially if you mention that your only alternative is to file bankruptcy.

Do not enter into any agreement or payment plan that you cannot realistically complete.

Get any settlement agreements in writing. Be sure to get a written statement from each creditor that says your debt was “fully satisfied” in exchange for whatever amount you agree to pay. Without that agreement, the creditor might still be able to pursue you later for more money.

3

Select the bankruptcy “chapter” you will file. Bankruptcy filings are separated into several different types, known as “chapters” (this is based on the separate chapters of the bankruptcy law). As an individual, you will most likely be filing either Chapter 7 or Chapter 13.[10]

Chapter 7 is referred to as “liquidation” bankruptcy and is available to individuals or business with assets below certain limits. Any property you own that is not exempt must be sold or returned to lenders to pay your debts. The remaining debts will be discharged (eliminated). For many people, all their property is exempt and they can discharge nearly all their debts without having to pay anything.[11]

Chapter 13 is the “wage-earner” bankruptcy. This is available to people with a regular income, who can afford to enter into a payment plan to pay off at least a portion of their debts over time.

Chapter 11 is referred to as the “reorganization” bankruptcy. Most often, Chapter 11 applies to companies that want to reorganize the way they operate to cut costs, without going out of business. Chapter 11 is available to individuals but requires more complicated paperwork and legal planning. If you have assets that you want to protect through Chapter 11, you should consult with an attorney.

Chapter 12 is very similar to Chapter 13. You would use Chapter 12 if the majority of your income is from farm operations or commercial fishing.

4

Prepare the bankruptcy petition paperwork. A bankruptcy filing consists of several individual forms, called “schedules,” which you must complete and submit to the court. You can download a copy of the bankruptcy forms at http://www.uscourts.gov/forms/bankruptcy-forms. For most people, you will need the following forms:

a voluntary petition (form B101)

Declaration about Schedules (form B106)

Summary of your assets and liabilities (form B106a)

Schedules A through J (form B106A through B106J)

Statement of Financial Affairs (form B107)

Statement of Intention (form B108)

If you are selecting something other than Chapter 7, you may need some additional forms as well. Talk with an attorney.

5

File your bankruptcy petition in the appropriate United States Bankruptcy Court. Bankruptcy is a federal system, which means that the law is the same anywhere in the country. However, you still are required to file your petition in the court where you live or maintain a regular place of business.[12]

6

Work with the bankruptcy trustee as your case progresses. When you initiate a bankruptcy case, the court appoints a trustee to oversee it. The trustee will contact you and notify you of any meetings that you must attend and any additional information you must provide. In most cases, particularly in Chapter 7, you will be notified early of a “Trustee’s Meeting of Creditors” or a “341 Meeting” (named for section 341 of the Bankruptcy Code). You must attend this meeting and be prepared to answer any questions the trustee may have regarding your bankruptcy papers. All of your creditors are invited to attend and ask questions as well, but most usually do not.[13]

7

Wait for your notice of discharge. The discharge is the final court order that terminates your debts. In most simple cases, this will come a few months after you file your petition, without having to take any further action.[14]

Part 3

Understanding Shared vs. Personal Property

1

Learn the difference between marital property and separate property. In general, when two people get married, they agree to share their property with each other. Income that is earned during the marriage and property that is bought during the marriage is generally considered shared marital property. Separate property belongs to only one spouse.[15]

Marital property generally includes employment income of either spouse, assuming that the income is put into a shared bank account and is used to pay the general bills and living expenses of both people. Marital property also generally includes the family home; the car, assuming that it is purchased with joint money and used equally; and most of the general property bought during the marriage.

Separate property generally includes anything that either spouse owned before the marriage and any gifts that either one receives during the marriage. Employment income, which is usually marital property, can be considered separate if the individuals display an intent to keep it separate. That is, if the earned money is placed into a bank account with only that person’s name on it, and only used for that person’s expenses, then it would be considered that person’s separate property.

2

Know whether you live in a common law or community property state. Most of the country follows the common law system. In these states, property--whether it is a house, car, bank account, or something else--belongs to the person whose name is on the deed, title, account, etc. If the paper has both names, then both people own it. If it only has one, then that one person owns it. In a community property state, ownership of all property is shared evenly by both spouses, regardless of whose name appears to be the owner.[16]

The community property states are Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (Alaska has a special system that makes property subject to community property laws if the couple agrees in writing.) All the rest are common law states.

3

Keep some property separate by showing intent. In common law states, you can keep some forms of property separate by demonstrating an intent to do so. For example, if a married couple wants to keep their earned income separate, they could do so by keeping separate bank accounts, depositing their own earnings into their own accounts, and dividing the family bills that each will pay. Whether you wish to do this is a personal decision.[17]

The separation of certain property must be genuine. For example, if a husband and wife keep separately named bank accounts, but they do not maintain careful separation of the money that goes in or out of each account, creditors may be able to treat the accounts as joint, regardless of the names.

Tips

It cannot be said often enough - if you are considering bankruptcy, you really should consult with an attorney.

Warnings

When completing the bankruptcy schedules, be sure to list your creditors completely. If you forget someone and do not list a particular debt, that debt might not be discharged. (Or, it still may be, but you’ll create additional paperwork for yourself.)

Article Info

This article was co-authored by Clinton M. Sandvick, JD. Clinton M. Sandvick worked as a civil litigator in California for over 7 years. He received his JD from the University of Wisconsin-Madison in 1998 and his PhD in American History from the University of Oregon in 2013.